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Pay Equity Update: Legislative Landscape

History has its eyes on us, and with what seems to be the entire world focused on issues of pay equity and pay equality, the legislative landscape is shifting. Arguably, every industry conference, news outlet, blog, organization and association have examined the equal pay challenge, offering many perspectives. Still, with the impending EE0-1 reporting deadline on Sept. 30 of this year, there is additional focus on the ever-changing legislation at all levels.

U.S. Legal Changes
In the United States, pay equity legislation, which emphasizes equal pay for equal or comparable work, is not new. We have been trying to tackle this issue at the federal level since 1963 with the Equal Pay Act (EPA), one of the first attempts to abolish wage disparity based on gender. Since enacting the EPA, women’s salaries have risen relative to men’s from 62% in 1979 to 82% in 2017. Most of this growth occurred in the 1980s and 1990s, but has remained in the 80% to 83% range since 2004.

As a result of this stagnation, other attempts at federal legislation followed, including various iterations of the Paycheck Fairness Act since 2011, which to date has not passed. Even with a delay because of the government shutdown in the U.S. in early 2019, the EEO-1 extended deadline is upon us, requiring government contractors with 50 or more employees and private employers with 100 or more employees to report on their employment data categorized by race/ethnicity, gender and job categories.

Despite federal requirements and in the wake of the November 2018 midterm elections that resulted in a divided Congress (historically proven to be ineffective), state and local governments have taken action in an effort to move the needle further and faster on the pay equity challenge.

California has been leading the pack since 1949 with its Equal Pay Law. As recently as 2015, the Fair Pay Act amended the law as it applies to an employee’s gender. Then, in 2017, the law was also expanded to provide protection for employees of a different race or ethnicity. In early 2018, California was one of the first few states to ratify new legislation that prohibited employers from inquiring about an applicant’s salary history and clarified an employer’s obligation to provide a salary range upon reasonable request from an applicant.

This enforces that an employer may not use an applicant’s prior salary as a factor in determining whether employment should be offered, or what salary to offer an applicant, in hopes of not perpetuating the cycle of pay discrimination.

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As of Jan. 16, 20 states, including Florida, New Jersey and Pennsylvania, plus the territory of Puerto Rico, have enacted gender-specific protections. Additionally, 27 states, including California, Illinois, New York and Texas, have taken a step further to include other protected categories, such as race/ethnicity or religion. The remaining three states (Alabama, Mississippi and North Carolina) have not yet endorsed any state-specific laws regarding pay equity.

Additionally, as of January, 12 states and Puerto Rico have enacted a ban on inquiring about salary history. Since then, eight more states have or are in the process of enacting similar salary history bans. Local laws have also passed in cities like San Francisco, Chicago and Philadelphia, as well as various counties in New York, creating further restrictions on salary history disclosure. Meanwhile, states like Michigan and Wisconsin have implemented legislation that prohibits local government from legislating laws that would ban employers from inquiring about salary history. This ever-evolving landscape requires us to be even more diligent than ever to make sure that we are not only compliant, but that we can anticipate the spread of such legislation and more.

Global Legislation Trends
For companies operating on a global scale, navigating the landscape becomes much trickier. Many countries, predominantly in Europe, have much more strict legislation than in the U.S. According to the International Labour Organization’s most recent “Global Wage Report,” 40% of all countries have adopted the full principle of “equal pay for work of equal value,” while the remaining countries concentrate on the narrower principle of “equal pay for equal work.”

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Global legislation can be sorted into four main categories. However, it is important to note that these legislations are still primarily focused on gender pay gaps. In Nordic countries like Norway, Sweden and Finland, pay transparency legislation requires that employees’ tax returns are available upon request, while in Germany, employees can request the median pay of colleagues of the opposite sex in the same or comparable role employed at their organization once every two years. In the U.S., specifically for federal contractors as well as in countries like Spain, Austria, Denmark, Belgium, France and Sweden, companies are required to undertake gender audits to detect, remedy and prevent unjustified differences between women’s and men’s pay, terms and conditions of employment. They are also required to devise equal pay action plans.

The third category encompasses those countries that mandate reporting of gender pay gaps. Australia was the first country to mandate the reporting of gender pay gaps with the Workplace Gender Equality Act 2012. And beginning in 2017, the United Kingdom followed suit as companies based in England, Scotland or Wales were subject to mandatory gender pay gap reporting which requires them to publish gender pay gap data on their own as well as a government website.

And finally, the most stringent legislation was passed in Iceland through the recent amendments to the Gender Equality Act, which went into effect in January 2018. Employers with at least 25 employees are now required to obtain certification from an accredited auditor as proof that women and men in their employment get paid on an equal basis.

Although there is no real global legislative requirement, it is evident that the legislation being enacted in various locations is not only in reaction to the local climate, but also based on precedent already set by neighboring or related places with similar political and financial environments. It is worthwhile to note the evolution of global legislation recognizes a shift away from laws that focus on fair pay within similar jobs. It has been realized that remediating pay alone only addresses the symptom and not the real causes of pay inequality. Later legislation begins to examine overall pay gaps and forces organizations to analyze further and explore the complete employee lifecycle to identify and attend to the root of their pay equality issues. For companies that are operating on a global scale, it is crucial to understand what legislation applies to your company’s operations.

Key Takeaways
The grand landscape of pay equity legislation may not be intended to be the silver bullet that will solve the pay equality problem. But instead, it can be argued that legislators are bringing a public focus on the measurable aspects of the problem so that we can all work together within our respective employment and associations to further analyze the issues and find potential long-term solutions.

The intense attention on and public discussion of pay equity and pay equality challenges have led to more awareness throughout organizations, as evidenced by groups such as the CEO Action for Diversity and Inclusion or the Equal Pay International Coalition (EPIC). Likewise, organizations, including Bloomberg, are publishing a Gender Equality Index to help satisfy the demand from current and prospective employees for pay information. The public awareness of pay equality issues is challenging organizations to be more transparent about their pay practices even as early as the recruiting and hiring process. Ultimately, the emphasis on pay equity is only scratching the surface of the overall diversity and inclusion challenges that we have all been facing for some time now.

With that in mind, it recalls another passion of mine: musical theater. It seems that whether you’ve been a theater buff your whole life, or you’ve never seen a Broadway show, you have likely heard of the Tony Award-winning Broadway hit musical “Hamilton,” brilliantly crafted by Lin-Manuel Miranda. If you’re a fan, you may have caught my reference at the beginning of this article.

Aside from modern storytelling told through predominantly hip-hop beats, one of the most profound aspects of the show is the very deliberate choice in casting. Whether you see the original Broadway production, catch the show as it’s passing through your area, or are fortunate enough to see it in London’s West End, I’d venture to say that the cast of characters will be the most diverse you’ve ever seen on a professional stage.

Miranda shared that it’s the story of American history told by America today. If our organizations all tackle the pay equity challenges with the ultimate goal of true diversity and inclusion in mind, we will be able to create cultures of diversity and inclusion in our workplaces and beyond. This is the moment we’ve been waiting for, and it’s time to “Rise up!”

About the Author

Glizcel Ditto is a principal compensation consultant at Curo.

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